© 2017 Morgan, Lewis & Bockius LLP

FAST BREAK :CONGRESS AND HEALTHCAREWHAT JUST HAPPENED AND WHAT IT MEANS FOR 2018Susan Feigin Harris, Kathy Rubinstein, and Jake Harper

January 17, 2018

AGENDA

• Tax reform legislation

• Issues punted and delayed by the stopgap spending package

• The GOP’s evolving strategy to deregulate and deconstruct the Affordable Care Act

• Critical flashpoints ahead for government healthcare programs in 2018

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TAX REFORM LEGISLATION

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• Tax-exempt municipal bond financing – Retains exclusion from gross income on

private activity bonds

– Repeals the exclusion on advance refunding of bonds

• Charitable deductions – With the doubling of the standard deduction,

fewer are expected to use this deduction

– Increases limitation for cash contributions to tax-exempt orgs. to 60% of a donor’s adjusted gross income (AGI)

• Medical expense deductions– Temporarily lowers threshold from 10% of

AGI to 7.5% for tax years 2017 and 2018

• Individual mandate

– Eliminated in 2019; still applies in 2017 and 2018

• Executive compensation

– Imposes 21% excise tax on tax-exempt orgs. for compensation in excess of $1 M

• Medical and scientific education

– Retains deduction for student loan interest

– No longer includes provision that would have taxed as income tuition waivers received by graduate students for teaching / research

• Unrelated business income tax (UBIT)

– Requires tax-exempt orgs. to calculate separately the net UBIT of each unrelated trade or business

https://www.morganlewis.com/topics/navigating-us-tax-reform

TAX REFORM LEGISLATION - HEALTHCARE

THE STOPGAP SPENDING PACKAGEUNFINISHED BUSINESS

To focus on tax reform, Congress put other priorities on the back burner that will need to be addressed in early 2018

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Budget CR expires

Immediate priorities for Jan. CR

– Children’s Health Insurance Program (CHIP)

– Medicare extenders, including:

– Medicare Dependent Hospital and Low-Volume Adjustment Programs

– Outpatient therapy caps

– Home Health rural and ground ambulance add-ons

2018 congressional calendar, January

CHILDREN’S HEALTH INSURANCE PROGRAM (CHIP)

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Timeline of recent changes in federal funding for CHIP

Source: Status of Federal Funding for CHIP and Implications for States and Families, Kaiser Family Foundation (Jan. 2018)

ACA MARKET STABILIZATIONTHE CSR PAYMENT CONTROVERSY

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Four scenarios for ACA subsidies, but most likely the uncertainty will persist

BIPARTISAN STABILIZATION LEGISLATION

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• Continues CSR payments for 2 years

• Authorizes sale of catastrophic “Copper” plans on Exchanges

• Amends 1332 waiver provisions

– Flexibility for health plan design

– Fast-track approval process

• Directs CMS to issue rules on interstate health insurance compacts

• Redirects existing user fee funding to states for consumer outreach

Bipartisan Healthcare Stabilization Act – “Alexander Murray”

• Authorizes funding for state reinsurance programs and state high risk pools established under a 1332 waiver

• Provides $5 B / year for 2019 and 2020 to help states create a risk mitigation program

– Includes $500 M for state administrative costs

Lower Premiums Through Reinsurance Act – “Collins Nelson”

DECONSTRUCTING THE ACA

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President’s Executive Order –Minimize the ACA’s Economic Burden

Issued Jan. 20, 2017

ACA MARKETPLACE - 2018

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2018 EnrollmentNumber of Insurers

Source: Centers for Medicare and Medicaid Services (Jan. 2018)

ASSOCIATION HEALTH PLANS (AHPs)

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President’s Executive Order –Promote Choice / Competition

• Directs federal agencies to consider / draft new rules and guidance to:

– Expand access to AHPs

– Extend short-term plan coverage from (up to) 90 days to possibly as long as 1 year; make it renewable

– Expected to be the subject of another rulemaking that could exempt short-term plans from all ACA protections

– Increase “usability” of employer-funded Health Reimbursement Accounts (HRAs)

– Likely as a way to fund premiums for coverage through the individual market

Proposed Rules –83 Fed. Reg. 614 (Jan. 5, 2018)

• Allows small employers to band together to purchase coverage in the large group market

– Includes sole proprietors with no employees

• Expands who can join an AHP

– Includes employers w/in an industry or that share geography (even if it crosses state lines)

• Requires AHPs to retain ACA protections against exclusion for pre-existing conditions and lifetime limits on benefits

• Allows AHPs to purchase cheaper plans that do not cover the 10 essential health benefits

Issued Oct. 12, 2017

MEDICAID 1115 WAIVERS

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Source: Approved Section 1115 Medicaid Waivers and Pending Section 1115 Medicaid Waivers, Kaiser Family Foundation (Jan. 12, 2018)

MEDICAID WORK REQUIREMENTS

• States with pending waivers

– Arizona

– Arkansas

– Indiana

– Kansas

– Kentucky (approved 1-12-18)

– Main

– New Hampshire

– North Carolina

– Utah

– Wisconsin

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ACA REPEAL / REPLACE

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Tax reform legislation repeals the individual

mandateKey event 4:

HHS SECRETARY NOMINEE

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• Previously, Azar clerked under Supreme Court Justice Antonin Scalia and worked for two years on the Clinton Whitewater investigation

• From 2001 until Feb. 2007, Azar worked at HHS as the department’s general counsel from 2001-2005 and then as deputy secretary from 2005-2007

• Azar joined Eli Lilly and Company as the senior vice president of corporate affairs and communications from 2007-2009, and then served as president of Lilly USA, LCC from 2012-2017

CRITICAL FLASHPOINTS AHEAD

• Medicaid reforms

– Increased waiver activity – Substantial regulatory changes– Emphasis on “market-like” reforms

• ACA market coverage and stabilization

– Deregulation to promote “competition and choice”– Fate of the CSR payments

• Medicare reforms

– Payment model initiatives from CMMI

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THANKS!

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Susan assists a diverse group of healthcare clients on a variety of federal and state regulatory issues, including reimbursement issues and disputes including Medicare, Medicaid, and commercial payors. Susan’s clients include hospitals, physician groups, trade associations, and government relations entities seeking strategic advice concerning policy advocacy. Susan negotiates numerous contracts on behalf of her clients and works with providers to ensure they are appropriately licensed, certified, and enrolled in government programs.

Susan Feigin HarrisPartnerHouston+1.713.890.5733susan.harris@morganlewis.com

Click Here for full bio

THANKS!

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Kathleen helps healthcare providers navigate the uncertainties of a shifting policy landscape. She has spent most of her career at the intersection of public policy and healthcare law, focusing on the regulation and financing of the Medicare and Medicaid programs, implementation of the Affordable Care Act, and government-led initiatives on healthcare reform. Colleagues turn to Kathleen for insight on healthcare policy and related issues and seek her out for collaboration in the development of articles and presentations of topical interest for healthcare clients.

Kathleen RubinsteinSenior Health Policy AnalystHouston+1.713.890.5726Kathleen.rubinstein@morganlewis.com

Click Here for full bio

Join us next month!

Please join us for next month’s webinar:

“Fast Break: Handling Sensitive Patient Records”

Featuring Lauren Groebe

February 21 at 3:00 PM (EST)

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